The Right Opinion
Social Security Disaster
Politicians who are principled enough to point out the fraud of Social Security, referring to it as a lie and Ponzi scheme, are under siege. Acknowledgment of Social Security's problems is not the same as calling for the abandonment of its recipients. Instead, it's a call to take actions now, while there's time to avert a disaster. Let's look at it.
The term was derived from the scheme created during the 1920s by Charles Ponzi, a poor but enterprising Italian immigrant. Here's how it works. You persuade some people to give you their money to invest. After a while, you pay them a nice return, but the return doesn't come from investments. What you pay them with comes from the money of other people whom you've persuaded to "invest" in your scheme. The scheme works so long as you can persuade greater and greater numbers of people to "invest" so that you can pay off earlier "investors." After a while, Ponzi couldn't find enough new investors, and his scheme collapsed. He was convicted of fraud and sent to prison.
The very first Social Security check went to Ida May Fuller in 1940. She paid just $24.75 in Social Security taxes but collected a total of $22,888.92 in benefits, getting back all she put into Social Security in a month. According to a Congressional Research Service report titled "Social Security Reform" (October 2002), by Geoffrey Kollmann and Dawn Nuschler, workers who retired in 1980 at age 65 got back all they put into Social Security, plus interest, in 2.8 years. Workers who retired at age 65 in 2002 will have to wait a total of 16.9 years to break even. For those retiring in 2020, it will take 20.9 years. Workers entering the labor force today won't live long enough to get back even half of what they will put into Social Security. Social Security faces Ponzi's problem, not enough new "investors." In 1940, there were 160 workers paying into Social Security per retiree; today there are only 2.9 and falling.
Some politicians claim that Social Security has a huge trust fund and is in good health. An uninformed public and a derelict news media don't challenge that lie. Back in August, politicians were in a tizzy over raising the federal debt limit. In an effort to frighten seniors, President Barack Obama said in a CBS interview, "I cannot guarantee that those checks go out on Aug. 3 if we haven't resolved this issue, because there may simply not be the money in the coffers to do it." Here's how we reveal the trust fund lie: According to the Social Security Administration, it has a trust fund with $2.6 trillion in it. If those were real assets, then the Social Security Administration could have mailed checks out regardless of what Congress did about the debt limit. The reality is that the Social Security trust fund consists of government IOUs that have no real value at all and probably are not even worth the paper upon which they are printed.
I believe that a person who is 65 years old and has been forced into Social Security is owed something. But the question is, Who owes it to him? Congress has spent every penny of his Social Security "contribution." Young workers have no obligation to be fleeced in order to make up for the dishonesty and dereliction of Congress. The tragedy is that most seniors just want their money and couldn't care less about whom Congress takes it from.
Here's what might be a temporary fix: The federal government owns huge quantities of wasting assets -- assets that are not producing anything -- 650 million acres of land, almost 30 percent of the land area of the United States. In exchange for those who choose to opt out of Social Security and forsake any future claim, why not pay them off with 40 or so acres of land? Doing so would give us breathing room to develop a free choice method to finance retirement.
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20 Comments
Johnbob
Wednesday, October 5, 2011 at 8:57 AM
40 acres? Throw in a mule, and its a deal! As long as I get to choose the 40 acres and get the mineral rights.
Howard Last
Wednesday, October 5, 2011 at 10:33 AM
Social security has one major difference with a Ponzi Scheme, no one is forced to join a Ponzi Scheme. Bernie Madoff did not force anyone to put money into his scheme. If Joe Stalin's best friend, FDR, was around today he should be spending time with Madoff in a 8 X 10 room.I am still waiting for someone to show me which section of the Constitution authorizes FDR's scheme.The scheme must be abolished, but the big problem is how to make whole all our citizens who had their funds stolen over the many years. Yes stolen, don't pay your FICA and see what happens. At least it is the IRS going after you and not the ATF.
Duke of Earl
Wednesday, October 5, 2011 at 11:24 AM
@ Johnbob I'll second that emotion. It doesn't even have to be a good mule.@ Howard Yoiu, too, are absolutely coorect, sir. As for the ATF or the IRS, it really makes no difference; neither can shoot that well.Dr. Williams,Correct as always, sir. Thank you and well done. Please, ignore most of my ramblings and keep up the outstanding work.The trouble with the current Social Security mess is that FICA "contributions" (great name, huh?!?!?!) were removed from the separate budget item and placed in the general fund in the 1970s or the 1980s. I forget the president, either Ford, Carter or Reagan; but, that screw up has crippled us as we approach our golden years (iron, really). If the Social Security Trust Fund had been allowed to remain separate, there would be money to go around (at least until next week). However, because the deficit was too great (sound familiar?); congress and a foolish president took the Social Security Trust Fund and "borrowed" it to reduce the deficit. Leave it to the politicians to do something so brilliant (facetious emphasisi added).Duke
KN
Wednesday, October 5, 2011 at 11:45 AM
@Duke - It was LBJ and the Democrats.
Howard Last
Wednesday, October 5, 2011 at 12:06 PM
Duke of Earl - the ATF will burn you out (Waco). The ATF mistakes a women holding a baby for a women holding a rifle (Ruby Ridge).
Sammy
Wednesday, October 5, 2011 at 12:06 PM
Dr. Williams,I think GWB had the right idea, we should privatize SS and get it out of the government's hands. It could be gradually phased out giving new workers the option to put their money into a private retirement account (~401k). If I had the money I donated to SS in a 401k along with my real 401k over the last 43 years I would be independantly wealthy. Of course the people who are currently getting ready to start drawing their SS would have to be paid with those IOUs you were talking about. Over time it would be phased out though. 40 acres of land even with a GOOD mule is a drop in the bucket.
Ernest Wilson
Wednesday, October 5, 2011 at 12:15 PM
Why not just go back to separate reporting for the trust funds? Would the politicians have to report the real deficit? Empower the trustees to invest the surplus like a pension fund, repay the $2.6T by borowing from the public and foreigners and use the current down market to snap up some great American companies. Deal with cronyism by electing real Trustees. Those of us who have been contributing in excess of payouts for the last 30 years are entitled to at least get our contributions back.
Tim
Wednesday, October 5, 2011 at 12:20 PM
Duke of Earl: Alas, the so-called 'trust fund' went away in the late 30's. FDR's folks thought a fund collecting money would look bad in economic hard times. So it was 'pay as you go', no surplus. In the early 80's, payments exceeded revenue, and taxes (FICA) went up a bunch. So the 'surplus' began, which Congress promptly spent. Now we come full circle, payments exceed revenue (last year, this year, and probably from now on) without many options. The unfunded liability would send officers of a private company to jail. Instead, we'll just print more money. We'll make Greece look like a model of fiscal integrity.
RudyT
Wednesday, October 5, 2011 at 12:40 PM
Just wait until the govt starts taxing retirement dividends at the same rate as common income....or until they retroactively index taxes on Roth IRA withdrawals....all to spread the wealth around a little. Too much private money --- so tempting to confiscate....you know, for the common good.
JAC
Wednesday, October 5, 2011 at 1:13 PM
Everyone acknowledges the trouble Social Security and Medicare are in. However, no one calls Obozo on his taking credit for a "payroll tax" reduction for businesses. What is being reduced in this "tax cut" is the Social Security and Medicare taxes paid on employees' incomes. He's actually making the Social Security and Medicare situations worse--the 2.9 workers mentioned in the article are now fewer!
Gelio
Wednesday, October 5, 2011 at 2:45 PM
@Sammy - Why not just privatize it as Herman Cain, and others, have mentioned. In the last debate, Cain brought up Chile's retirement program in relation to Socail Security, and how they faced the same probelm 30 years ago that we now face. They privatized the system, grandfathers those currently collecting into the old system, gave current wrkers the option to choose which system they wanted (91% chose the new), and all new workers would be enrolled into the new system. A NY Times writer (of all people) compared SS to Chile's system and determined that he would draw $54,000 a year vs $18,000 on SS, plus receive a one time contribution of $253,000. Plus you can will your fund to your kids or grandkids as well. Sounds like a sound system, so sound that 36 other countries have adopted it.
p3orion
Wednesday, October 5, 2011 at 3:37 PM
As I've said before, the key to breaking the Democrat obsession with Social Security would be to publicize the fact that it disproportionately cheat minorities. Since you have no legal "right" to your Social Security funds (as per court decision) you cannot pass any of it on to your children or whoever you wish to name as a beneficiary. Therefore, you have to live long enough to collect back what you've paid (which, as Dr. Williams points out, becomes harder every year.) So the earlier you die, the more you lose.And who has the lowest life expectancy, and therefore loses the most? Blacks and Hispanics!I'd dearly love to see some enterprising Republican come out and ask thew Democrats why they are working so hard to cheat the minorities!
John L. Sutherland
Wednesday, October 5, 2011 at 4:11 PM
Folks seem to forget that "privatizing" Social Security has already worked, and worked well. The closest example to me is Galveston County, Texas who opted out of Federal Social Security years ago and put their (believe same amount) of contributions with, OMG, gasp, an INSURANCE Company. Today's recipients now receive about 3-4 times we regular Social Security beneficiaries receive on par with past contributions. Funny, when the Galveston (and some other Counties) plans started receiving rave reviews, the Feds quickly made it illegal to opt out, BUT, they had to grandfather current private participants. Guess there would be even less money to steal today if the Feds hadn't "stopped the bleeding."
pete
Wednesday, October 5, 2011 at 5:35 PM
Here's what might be a temporary fix:Every office holder and their families be subjected to a 150% tax to replenish the SS fund. They will be allowed to keep no more than $500,000 in cash and property per family.They or their family members pillaged SS for their pet projects (an airport, a stretch of well manicured highway, or building that bears their name followed by the word 'Memorial.'
Howard Last
Wednesday, October 5, 2011 at 7:08 PM
The best way to straighten out social security is to make sure the aristocrats (oops members of congress) are on it and their stealing money is ended. No full retirement pay, no medical plan, etc. They have to be on the same plan as us peasants. Maybe a few of them should be in the same housing unit as Bernie Madoff. That would not be fair as Bernie's crimes were not as bad as their's.